Tag: dollar

Dollar Crisis

Over the weekend, Liu Mingkang, a senior Chinese official, blasted the economic policies of the Obama Administration.  He identified low interest rates in the U.S. as the cause of “massive speculation” that was inflating asset bubbles around the world. The U.S. dollar is being used in what is known as a carry trade and is borrowed cheaply to finance the purchase of real estate in Asian cities like Hong Kong and Singapore. The easy money policies of the Fed are also fueling a boom in commodity prices.

The ordinary American, if not the political class, recognizes that neither the Fed’s monetary actions nor the trillions in spending have helped them. Unemployment is in double digits. Former senior Bush economic adviser Larry Lindsey is reported to have estimated that Americans’ net worth has dropped $13 trillion since the beginning of the recession in December 2007. Americans suffer while speculators profit.

We are on the cusp of a dollar crisis.  President Jimmy Carter faced a similar crisis in his presidency. Carter ousted his own choice for Chairman of the Fed and appointed Paul Volcker to that position. Volcker recognized that the dollar crisis needed to be ended and instituted painful but necessary sound money policies.  President Reagan re-appointed Volcker and together they restored American prosperity. Volcker advises President Obama and can explain to the president why he must act now.

Ask Consumers if They Like a Weak Dollar

According to a Washington Post story today, “the weak dollar is one problem the United States loves to have.” The story reports how the fall of the dollar against the euro and other currencies in the past year has boosted U.S. exports and discouraged imports, cutting the trade deficit and allegedly boosting the U.S. economy. A weaker dollar has spurred complaints in Europe and elsewhere, but here at home the Post story leaves the impression the approval is practically unanimous.

Nowhere in the 1,058-word story is the impact on consumers ever mentioned. But it is American consumers who pay the biggest price when the dollars we earn buy less on global markets. We are paying more for oil, which not coincidentally has zoomed toward $80 as the dollar flounders. A weaker dollar means higher prices than we would pay otherwise for a range of goods, from imported shoes and clothing to food, that loom large in the budgets of American families struggling to make ends meet in this difficult economy.

Ignoring consumer interests is widespread in reporting about trade. It reflects the strong bias of elected officials to see trade issues strictly through the lens of producers and never consumers. After all, it is producers who form trade groups and hire lobbyists to promote their exports or protect themselves from imports. Nobody in Washington represents the diffused, disorganized but much more numerous 100 million American households.

The dollar’s value should be set by markets, and I have no reason to believe the dollar is over- or undervalued. But pardon me if I dissent from the consensus that a falling dollar is unambiguously good news.

Government Pays $4 Million for a Bike Rack

bike rackThe $4 million Union Station Bike Transit Center is scheduled to open in Washington, DC on October 2nd.  According to an August Washington Post story, 80 percent of the cost of this opulent bike center is being borne by federal taxpayers via the U.S. Department of Transportation.

Look, I harbor no animosity against bike riders, but under what authority – legal or moral – does the federal government tax me in order to build bike centers for parochial, special interests?  The Constitution?

But let’s pretend – and I mean pretend – that such federal expenditures are legitimate.  The Post article say the center will have 150 indoor bike racks and 20 outdoors.  A recent NPR article says it will hold 130 bikes.  Whatever the figure, at a cost of $4 million, it comes out to around $25-$30 thousand per bike.  And, yes, I recognize that the “1,700-square-foot building west of the station will also have changing rooms, personal lockers, a bike repair shop and a retail store that will sell drinks and bike accessories.”  But the ultimate purpose is to hold bikes.  In my mind, the extra extravagance merely reflects the fact that taxpayers are picking up the tab.

There’s the old saying that a picture is worth a thousand words.  In this case, it’s more like 4 million:

bike rack 2

There you go, America.  Your taxes are funding this multi-million dollar bike rack in Washington, DC – the beneficiaries of which will probably be the same Capitol Hill lobbyists and congressional staffers who spend all day pilfering your paychecks.

What’s A Dollar Worth?

It’s not just Americans worried about the flood of dollars from the Fed.  The Chinese and now the Malaysians also are wondering if they should keep dealing in greenbacks.

Reports the Wall Street Journal:

Malaysia’s prime minister said China and his country are considering conducting their trade in Chinese yuan and Malaysian ringgit, joining a growing number of nations thinking of phasing out the dollar.

“We can consider whether we can use local currencies to facilitate trade financing between our two countries,” Malaysian Prime Minister Najib Abdul Razak told reporters at a briefing Wednesday after meeting with China’s premier, Wen Jiabao.

“What worries us is that the [U.S.] deficit is being financed by printing more money,” Mr. Najib said. “That is what is happening. The Treasury in the United States is printing more notes.”

The dollar won’t easily be displaced as the world’s principal reserve currency.  But Washington appears to be doing everything possible to hasten that day.

Perhaps Americans should consider keeping their wealth in yuan or even ringgits.  At least they might retain their value even as the Fed and Treasury attempt to inflate and spend the U.S. economy into oblivion.